When analyzing a price chart, as a rule, two concepts are used - trend and stabilization (range). The general rule is that in the range we work from the borders, inside the corridor, but if you are on a trend then follow it. Buying from the lower border if you are on an uptrend, and selling from the upper border if the trend is down.
There are hundreds of chart patterns and thousands of indicators to determine the beginning, end, and continuation of a trend or a corridor to help you make sure you are took the right choice. It is unlikely that there is a person who knows all the criterias created. The good news: you do not need to know all of them. But I am sure that among those who lose money on the stock exchange there is a fairly wide layer of people who perfectly know the theoretical part, which should bring a guaranteed profit. In principle, successful people come to the market. And they are able to read two or three books on technical analysis and even learn those several hundred patterns by heart. But it doesn't work ...
The main reason, in my opinion, is that among the vast mass of educational literature about the market, I have not found practical instructions on the main issue - money management, namely, it contains the secret of your success. I am deeply convinced that the slogan trend is our friend is wrong. Time is money, this is the source of our enrichment.
But the trend is a friend exists really. So let's try to figure it out.
Dow's definition of a trend is that each next extreme is higher than the previous one on an uptrend and below the previous one on a downtrend.
I think all existing patterns are based on this definition. Hence the disagreement, almost any point on the chart can be viewed as a continuation of the old trend, and the beginning of a new one.
Let's introduce a new configuration. This structure will combine both trends and stabilization into a single whole. The end of the previous structure will serve as the beginning of the next one.
Let's go back to Dow. When does a trend up start? When you can see on the chart the maximum is not lower than the previous maximum and the minimum is not lower than the minimum. And when will this trend end? When you can see the maximum is not higher than the previous maximum and the minimum is not below the minimum.
I called this figure stabilization. This is the core of which any movement in the market consists. Stabilization differs from a trend - apart from the main trend, which is the core of stabilization, it contains the end of the previous trend and the beginning of the next. The easiest way to see stabilization is on a line chart.
The stabilization that contains the trend up is called the up stabilization. If the stabilization contains a downward trend, we get a down stabilization.
After the upper stabilization is always followed the down one and vice versa. If the up stabilization is larger than the down one, you will see a classic uptrend with corridors. If the down stabilization exceeds the up one, then we get a classic downtrend with corridors.
Unfortunately, any stabilization carries uncertainty. Those. if you started stabilizing up (this means that you either became above the previous maximum or did not fall below the previous minimum), this does not guarantee that it will end at a price higher than the price at which you determined the beginning of this stabilization (the price will immediately go down below the previous minimum).
But I think, the up and down stabilizations are the best for our understanding. If the upper stabilizations do not intersect with each other, then the price definitely falls. If they crossed between themselves, then the price either rises or in the corridor.
Perhaps this article will be difficult and even seem pointless at first glance. But it takes time to learn to see these stabilizations. It's easier to do this either on a line chart or on volatility charts (kagi, renko, point&figure)
The result of developing the skill of seeing such stabilizations and their formation will be the ability to trade within the corresponding stabilizations, regardless of the actual price movement.
Any questions are welcome.
There are hundreds of chart patterns and thousands of indicators to determine the beginning, end, and continuation of a trend or a corridor to help you make sure you are took the right choice. It is unlikely that there is a person who knows all the criterias created. The good news: you do not need to know all of them. But I am sure that among those who lose money on the stock exchange there is a fairly wide layer of people who perfectly know the theoretical part, which should bring a guaranteed profit. In principle, successful people come to the market. And they are able to read two or three books on technical analysis and even learn those several hundred patterns by heart. But it doesn't work ...
The main reason, in my opinion, is that among the vast mass of educational literature about the market, I have not found practical instructions on the main issue - money management, namely, it contains the secret of your success. I am deeply convinced that the slogan trend is our friend is wrong. Time is money, this is the source of our enrichment.
But the trend is a friend exists really. So let's try to figure it out.
Dow's definition of a trend is that each next extreme is higher than the previous one on an uptrend and below the previous one on a downtrend.
I think all existing patterns are based on this definition. Hence the disagreement, almost any point on the chart can be viewed as a continuation of the old trend, and the beginning of a new one.
Let's introduce a new configuration. This structure will combine both trends and stabilization into a single whole. The end of the previous structure will serve as the beginning of the next one.
Let's go back to Dow. When does a trend up start? When you can see on the chart the maximum is not lower than the previous maximum and the minimum is not lower than the minimum. And when will this trend end? When you can see the maximum is not higher than the previous maximum and the minimum is not below the minimum.
I called this figure stabilization. This is the core of which any movement in the market consists. Stabilization differs from a trend - apart from the main trend, which is the core of stabilization, it contains the end of the previous trend and the beginning of the next. The easiest way to see stabilization is on a line chart.
The stabilization that contains the trend up is called the up stabilization. If the stabilization contains a downward trend, we get a down stabilization.
After the upper stabilization is always followed the down one and vice versa. If the up stabilization is larger than the down one, you will see a classic uptrend with corridors. If the down stabilization exceeds the up one, then we get a classic downtrend with corridors.
Unfortunately, any stabilization carries uncertainty. Those. if you started stabilizing up (this means that you either became above the previous maximum or did not fall below the previous minimum), this does not guarantee that it will end at a price higher than the price at which you determined the beginning of this stabilization (the price will immediately go down below the previous minimum).
But I think, the up and down stabilizations are the best for our understanding. If the upper stabilizations do not intersect with each other, then the price definitely falls. If they crossed between themselves, then the price either rises or in the corridor.
Perhaps this article will be difficult and even seem pointless at first glance. But it takes time to learn to see these stabilizations. It's easier to do this either on a line chart or on volatility charts (kagi, renko, point&figure)
The result of developing the skill of seeing such stabilizations and their formation will be the ability to trade within the corresponding stabilizations, regardless of the actual price movement.
Any questions are welcome.